How Does Private Firm Patenting Affect Antitakeover Provisions in Corporate Charters? Evidence from Initial Public Offerings

Thomas J. Chemmanur, Manish Gupta, Karen Simonyan and Xiang Zheng

Journal of Law and Economics, 2026, vol. 69, issue 3, 517 - 541

Abstract: Using patent examiners’ leniency as an instrument, we conduct an instrumental variable analysis showing that firms with a larger number (and higher quality) of patents before initial public offerings (IPOs) incorporate a larger number of and stronger antitakeover provisions (ATPs) in their corporate charters at their IPOs. We examine two mechanisms through which pre-IPO patenting may affect the number and strength of ATPs in corporate charters: a management-entrenchment mechanism, in which ATPs merely entrench firm managers after an IPO, and a long-run-value-creation mechanism through which ATPs incentivize a firm’s top managers to create long-run value by allowing them more time for development before they lose control to rival management teams. We present two pieces of evidence that suggest the long-run-value-creation mechanism dominates the entrenchment mechanism as an explanation for the relationship between pre-IPO patenting and ATPs for our sample firms with greater pre-IPO patenting.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/742861 (application/pdf)
http://dx.doi.org/10.1086/742861 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:doi:10.1086/742861

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().